*** GAME END *** Your economy produced: 439918 apples. Deflation is easily combated by raising interest above the next expected deflation level so that saving money becomes more lucrative than spending it. Inflation is combated by lowering interest as soon as it rises above the interest level. I never went below 0.50% interest, never above 5.50%. This is easy, maybe I should apply for the job of central banker.
I fought inflation in SimCB and my economy produced 440944 .
-0.5% interest rate to reduce inflation, 90% of the time.
I tried to keep inflation between 1.5-2% for the first 50 months and then decided to find out what happens if I YOLO permanently fix the interest rate to -0.5%. After the 240 months I somehow ended with GDP 442999 and 1.53% inflation. How come? Shouldn't I have a runaway inflation?
Under certain Keynesian views, Fed policy is mostly irrelevant, and only fiscal policy matters. Or actual printing... which low rates and QE are very different from.
Another view from the neoclassical school has a similar conclusion dubbed the Policy Ineffectiveness Proposition.
But others say Fed policy does matter because in the real world contracts and prices are sticky.
I tried to keep inflation between 1.5-2% for the first 50 months and then decided to find out what happens if I YOLO permanently fix the interest rate to -0.5%. After the 240 months I somehow ended with GDP 442999 and 1.53% inflation. How come? Shouldn't I have a runaway inflation?
Under certain Keynesian views, Fed policy is mostly irrelevant, and only fiscal policy matters. Or actual printing... which low rates and QE are very different from. Another view from the neoclassical school has a similar conclusion dubbed the Policy Ineffectiveness Proposition. But others say Fed policy does matter because in the real world contracts and prices are sticky. https://en.wikipedia.org/wiki/Policy-ineffe…
That would result in an economy with huge deflation: People consuming the bare minimum of apples needed for survival because their gold savings would appreciate each year in value.
For decades computers and related technology have been dropping in price. Yet people still buy and the industry is one of the most prosperous in the economy.
It is difficult to compare because we don’t have apples that have become smaller with higher nutritional value by approximately a factor of two every 18 months.
I made this game in order to try to wrap my head around central banks, inflation and macroeconomics, in order to get a better understanding of the aftermath of the global financial crisis and the current period of high inflation. Here is a blog post that goes into further details: https://benoitessiambre.com/simcb.html
Thank you! I've looked around for macroeconomic simulations before and found very little. Looking forward to learning from this.
> While there were panics and issues before the era of active central banks, most fo the time, things were calm. Wow - this is insanely inaccurate. Before the active central bank era (call it post-WW2), recessions lasted up to twice as long as they do during the modern era. Unemployment also peaked at much higher numbers: 25% during the Great Depression, for example. The pre-central bank localized agrarian and early…
> The pre-central bank localized agrarian and early industrial economic model leant itself to boom and bust cycles eg massive instability Glad to see we put those patterns behind us /s
I mean, we haven't had a depression quite as world-shatteringly gigantic at the Great Depression since. Although I guess it isn't obvious if that's because the system we have now is somehow better, or if it is just the case that we've been more prosperous as a baseline since then, and so our various downturns haven't launched people into such a level of destitution.
FYI the Fed used to have an educational game called "Chair the Fed". They took it down in 2021. I'll leave the meaning of that action as an exercise for the reader.
I made this game in order to try to wrap my head around central banks, inflation and macroeconomics, in order to get a better understanding of the aftermath of the global financial crisis and the current period of high inflation. Here is a blog post that goes into further details: https://benoitessiambre.com/simcb.html
Please remove the strip-ey overlay you have, it makes the text actively harder to read.